Zimbabwe Farmers' Union

Monetary Policy Highlights and Analysis

27 Feb 2019

Interbank foreign exchange market has been established with effect from Friday on a willing buyer willing seller basis

A new currency RTGS$ has been created by denominating existing RTGS balances, bond notes and coins into RTGS$s

Reference Currency

The monetary statement is not clear on whether Zimbabwe’s reference currency has shifted from the US$ to the RTGS$.


Devaluation of RTGS, Bond notes and Coins

Although the US$ was trading at a premium on the parallel market, officially devaluing the RTGS, Bond Notes has multifaceted negative effects. It effectively means that

  • The value of salaries and wages have been eroded by the exchange rate which could be between 3 to 4 RTGS$ to the USD
  • Pensions which were deducted from salaries (RTGS) which were at par with the USD have been devalued. Assuming a rate of 2.5 RTGS to the dollar, if one had accumulated US$10000 it is now effectively US$4000. This should be understood on the background that pensions have been accumulated over a long period of time including before the introduction of the bond notes in 2016.
  • All bank balances which were officially at 1:1 with the USD have been devalued as explained for pensions. This has negative implications on savings made over a long time even before the introduction of the bond notes when they (the savings) were made in real United States Dollars.


Export Retention Scheme

The policy has maintained the export retention scheme.   At 30% for tobacco and cotton growers, including a rider that the retained export receipts should be utilised within 30 days, after which the unutilised export receipts will be offloaded into the market at the prevailing market exchange rate.


Of all the retention thresholds farmers are getting the least at 30% yet tobacco and cotton merchants are getting 80%. Without the farmer there would be no merchant yet farmers get the least when they are the producers of the commodity.


The 30-day ultimatum is not good for business. First farmers have earned the country foreign currency but are limited to only 30% of the value created. As if that is not enough, they must spend it within 30days.  The same applies to all exporters. The reality on the ground is that it takes more than 30 days to place on offshore order and pay for it and not all orders must be made at the same time during the business cycle.

Farming is seasonal and farmers would want to keep their funds for the next season’s operations. No safeguards have been placed to carryover these funds to the next season.


Domestic Transactions and pricing system


Section Two 1 (iii) implies that pricing for domestic transactions shall be in RTGS$ and will eliminate the existence of the multi-pricing of goods and services in foreign currency within the domestic market yet section i) implies that the RTGS$ will become part of the multicurrency system. This is confusing as in a multicurrency system all currencies in the basket of currencies are legal tender and in itself implies multi-pricing depending on the currency one chooses to transact in.

The policy is not clear whether it has outlawed the pricing of goods and services in foreign currency.